Assume a society consists of two economic groups: one group is rich, and the other group is poor. Suppose that 50 percent of the population is rich, while the other 50 percent of the population is poor. Consider two scenarios.
Scenario A: The rich have $60,000 each, while the poor have $2,000 each.
Scenario B: The rich have $7,500 each, while the poor have $750 each.
If you only care about average income and not about equity, you would prefer scenario A or B, which has an average income of what?
